BEE is to the detriment of all South Africans
Wednesday, March 13th, 2013
During a presentation to the Parliamentary Portfolio Committee on Trade and Industry, trade union Solidarity today argued that black economic empowerment (BEE) was to the detriment of all South Africans, including the vast majority of black people. For this reason, Solidarity recommended that the Broad-Based Black Economic Empowerment Amendment Bill of 2012 be withdrawn.
Piet le Roux, senior economic researcher at the Solidarity Research Institute (SRI), says the purpose of the amendment bill is to enable government to enforce current BEE legislation more stringently. ‘The amendment bill will result in all South Africans being disadvantaged, including those who are supposed to benefit from BEE. The bill will lead to even more resources being made available to relatively less competent entrepreneurs – black, coloured, Indian and white – those entrepreneurs who would not make the grade without government assistance. This means that fewer consumer goods will be available to all South Africans. The cost of this project will therefore ultimately be borne by ordinary consumers, who will now have to pay more for basic consumer goods.’
According to Le Roux it is important to bear in mind that it is not just less competent black entrepreneurs who stand to benefit from artificial investments, but indeed also the less competent white entrepreneurs. ‘White entrepreneurs who would not have made it in the market, but who somehow managed to get a black, coloured or Indian BEE partner, are being kept in business at the expense of consumers.’
Le Roux emphasises that not all emerging entrepreneurs depend on government assistance, but points out that BEE enables weaker entrepreneurs to do business in an artificial and unsustainable way. ‘Consumers in the market reveal the most effective entrepreneurs through their spending patterns. The most effective entrepreneurs are those who are able to offer consumers the greatest flow of goods and services in the cheapest way. Investors take note of these spending patterns and, based on these patterns, allocate resources to entrepreneurs. BEE replaces this consumer-driven allocation of resources with a politically driven process. When there is political interference these resources tend to rather flow to the less effective entrepreneurs, and consumers have to be content with fewer and more expensive goods and services. The real entrepreneur does not depend on political allocation to achieve success, but will be revealed by consumers by means of their spending patterns.’
Le Roux says ordinary consumers, particularly the poor, are those who suffer under artificial entrepreneurs. The poorer a person is, the harder he or she is hit by higher prices. ‘The only material benefit of BEE goes to the so-called black elite and those white persons with the right connections at the expense of the vast majority of consumers in South Africa, including black, coloured and Indian persons.’